Stocks frisky - 12-17-98

JulieRannazzisi

Elsewhere, Republican leaders decided to begin the impeachment debate Friday and conclude the process by Saturday even if the air attacks on Iraq continue.

"I'll withhold judgement on the American psyche as to why it is that the stock market generally rallies when the bombs and/or missiles are flying, but that's what history shows. And this morning provided no break from that tradition," said Bill Meehan, chief market analyst at Cantor Fitzgerald.

Meehan noted that since 1941 the Dow has rallied an average of 3% three weeks after weapons have been unleashed in 22 of the previous 27 occasions.

Regarding the impeachment process, Meehan said the situation in Washington seems to be of very little consequence to Wall Street.

"In fact, amidst the flood of liquidity, very little seems likely to detract investors who are anticipating the Santa Claus rally," he said.

Douglas Myers, vice president of equity trading at Interstate/Johnson Lane, said the market is not responding to the missile launches on Iraq as players view the U.S. attacks as a limited one-time deal to force Iraq into compliance.

And, ultimately, the impeachment proceedingswon't have too much of an effect on the market when they resume with the House vote as it's been largely discounted by the market, Myers said.

Peter Boockvar, equity strategist at Miller, Tabak, Hirsch & Co., said the market will again begin to feel the heat of the Presidential impeachment debate when the House actually sits down to vote, but until then, it will be relegated to the back of people's minds.

Within the market, the best performers were bank, technology and transportation issues while oil and gold stocks topped the list of decliners.

The financial sector
$nf
charged ahead, buoyed by a report in The Wall Street Journal indicating that Chase Manhattan Bank (CMB)
CMB, +5.26%
would top profit forecasts for the fourth quarter and full year. Chase said all its major businesses showed strength, despite the global catastrophe that hit financial markets in August and hurt bank stocks' earnings in the third quarter. Chase's stock jumped 6 3/8 to 69 7/8, or 10.0 percent. See related story.

Meanwhile, Citigroup (C)
C, -0.18%
was the volume leader on the New York Stock Exchange, with 12.2 million shares changing hands. The stock advanced 2 3/8 to 50.

In the oil patch
$xoi
, meanwhile, stocks slumped as oil prices tanked. Commodity prices in general fell, with the Bridge/Commodity Research Bureau's index sinking 4.07 points to 190.93. On Wednesday, oil prices spiked as the Iraq situation unfolded.

Boockvar labeled the reaction in oil a typical "buy the rumor sell the fact" response. In addition, oil ministers from Venezuela, Saudi Arabia and Mexico -- meeting in Madrid to counter the 12-year lows plaguing the crude market -- failed to produce a decision for additional production cuts, further depressing prices. See related story.

Computer software stocks
$cwx
were generally higher, led by Adobe Systems (ADBE)
ADBE, +0.78%
, which tacked on 5 47/64 to 43 7/8, or 15.0 percent. The software company posted a fourth-quarter profit of 78 cents a share, 14 cents better than analysts had anticipated. Earnings for the year-ago period were 64 cents a share. See Software Report.

The internet sector
$iix
continued to plow ahead. Amazon.com (AMZN)
AMZN, +0.17%
slid 12 1/4 to 276 3/4 on news that Merrill Lynch analyst Jonathan Cohenset a price target of $50 for the stock, less than one-fifth its current value. The move surprised the market as it came just a day after CIBC Oppenheimer analyst Henry Blodget raised his price target to $400 from $150. Shares fell 10 to 279. Before the market opened on Thursday, Amazon stock also was downgraded to "hold" from "outperform" by analyst Miles Russ of Wheat First Union.

Internet bellwether America Online (AOL)
aol
was the second most actively traded issue on the NYSE, with 11 million shares changing hands. AOL gained 2 15/16 to 99 1/8. See Silicon Stocks.

Meanwhile, Earthlink (ELNK)
ELNK, -1.21%
shares surged 1 1/4 to 62 1/4 after the company announced an agreement with Amazon.com to make the latter an exclusive book retailer on Earthlink's home page and personal start page.

In other specific issues, Doubleclick (DCLK)
dclk
shares rocketed 5 11/16 to 45 3/16 after the B.T. Alex Brown restated the stock's rating with a "buy." See full story.

On the technology front, prices perked up with the broad Pacific Stock Exchange Technology Index
PSE, +0.04%
climbing 2.4 percent and the Morgan Stanley Technology Index
$msh
rising 2.6 percent. Leading on the way up, chip maker Micron Technology (MU)
MU, -0.77%
roared 6 to 52 7/8, or 12.8 percent, after BancBoston Robertson Stephens said it expects the stock will likely hit $200 a share by the end of 2001. See full story.

In the transportation
$trx
sector, shares were bolstered by Federal Express Corp. (FDX),
FDX, -0.24%
which piled on 4 5/16 to 76 5/16. The firm's shares rose after posting better-than-expected fiscal second quarter earnings of $1.23 per share vs. $1.00 year-ago. The First Call consensus estimate was for earnings of $1.06 per share. See full story. In the Treasurys appeared busy reversing most of Wednesday's trade. Short maturities led the market on the way down Thursday and the "flattening trade" prevailed, which is not typical during times of international uncertainty. In fact, that's when investors tend to pile cash into the most liquid areas of the market, such as the bill sector, which instead was staging a shabby performance.

The dollar, meanwhile, continued to dive against major currencies, again not a typical reaction to warfare.

The bond market's only response to Iraq came on Wednesday, immediately following the first round of air strikes, as prices spiked modestly in what players dubbed a sort of buy-the-rumor sell-the fact reaction.

The 30-year Treasury lost 10/32, to yield
TYX, +2.24%
5.016 percent, after breaching 5 percent following the raid on Iraq Wednesday.

In economic news, the trade deficit shrank to $14.2 billion in October. The Wall Street economists surveyed by CBS MarketWatch had forecast a trade gap of $15.5 billion in October. The deficit in September was revised higher to $14.4 billion from the $14 billion previously reported. See full story.

Ian Shepherdson, chief U.S. economist at High Frequency Economics, said the deficit failed to rise largely because of aircraft exports, which rose a touch further, defying expectations for a drop. "We remain sure this is a fluke," he said.

In addition, weekly jobless claims fell by a surprising 31,000 to 296,000 compared to expectations for a 318,000 reading, while the Philadelphia Fed's December index rose to -3.8 in December from -14.1 in November.

Meanwhile, the economic docket will be dry on Friday. See , , and .

COMMODITIES

New York light sweet crude for January delivery lost $1.38, a loss of 11.1 percent, to $11.00.

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